On January 28, 2019, President Donald Trump issued an Executive Order including Petroleos de Venezuela, S.A. (PdVSA), Venezuela’s state-owned oil company, and any entity owned or controlled by PdVSA, within the definition of the term “Government of Venezuela.” The definition was also broadened to include the Central Bank of Venezuela and members of the Nicolas Maduro regime. In response, the U.S. Department of Treasury’s Office of Foreign Asset Control (OFAC) immediately included PdVSA within its Venezuelan sanctions.
The impact of this Executive Order and action by OFAC is expected to expand current sanctions to effectively block PdVSA’s property within the United States and to curtail any transactions between U.S. companies and PdVSA or any entity in which PdVSA has a majority stake. Venezuela is the fourth largest provider of oil to the United States.
Concurrent with the PdVSA sanctions, OFAC also issued a number of exceptions, allowing certain transactions to mitigate the impact of the sanctions outside Venezuela itself. For example, purchase and importation of petroleum and related products from PdVSA is permitted until April 28, 2019, so long as the proceeds of such sales are paid into designated blocked accounts, rather than directly to PdVSA. Further, CITGO Petroleum, PdVSA’s U.S. subsidiary, is not subject to the current sanctions through July 27, 2019.
Any company doing business with PdVSA or one of its affiliates should immediately consider the impact of the sanctions and related exceptions on any near-term transactions.